BILL ANALYSIS �
AB 1690
Page 1
Date of Hearing: May 7, 2012
ASSEMBLY COMMITTEE ON BUDGET
Blumenfield, Bob, Chair
AB 1690 (Nestande) - As Amended: March 29, 2012
SUBJECT : State Budget
SUMMARY : Prohibits the Governor from assuming any new revenues
associated with new program or taxes in the January budget
submission. This bill also requires the Governor's Budget
submission to contain a list of loans and long-term liabilities.
Specifically, this bill :
1)Excludes revenues generated from laws, program, or executive
actions not in effect at the time the budget is submitted to
the Legislature from being counted as revenue in the
Governor's January Budget submission.
2)Requires the Governor's January Budget Submission include:
a) a list of loans made to the General Fund and a summary
of each loan;
b) a list of all General Fund obligations to pay deferred
or suspended expenditures or to transfer funds to a Special
Funds; and,
c) a list of "key liabilities" related to debt,
infrastructure, retirement and other liabilities.
3)Requires the Governor's January Budget specify the percentages
and amounts of General Fund revenues that must be "set aside
to pay off the key liabilities."
EXISTING LAW : California's Constitution requires the Governor
to submit a balanced budget within the first ten days of each
calendar year. The contents of the budget submission are
articulated in various statutory provisions of the Government
Code.
FISCAL EFFECT : Small cost associated with the creation and
maintenance of new budget documents.
COMMENTS : The author's intent in crafting this bill is to draw
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more attention to the issue of "key liabilities" within the
budget discussion. The term "key liabilities" is derived from a
letter the Legislative Analyst's Office sent to Assemblymember
Juan Arambula in 2009.
The bill contains two divergent provisions regarding the
Governor's January budget submission.
1) "Key Liabilities." The bill requires reporting of loans,
deferrals, and other liabilities. The bill further requires
that revenue be identified for the purposes of paying off
liabilities. While the intents of this reporting is to
essentially replicate the 2009, LAO Letter to Assemblymember
Juan Aramabula in the budget submittal. This reporting appears
to echo an approach taken by Governor Brown in his 2012-13
January Budget, which included a discussion of the "Wall of
Debt" on page 11 of the Budget Summary. This suggests that the
bill is not necessary to evoke the discussion regarding the
California's debts, as it is already a central theme in budget
discussions.
In addition, the bill appears to pair the budget, an annual
spending plan, with long-term liabilities, which may not have
any impact on the budget for decades. The California
Constitution requires the adopted budget to be balanced.
Therefore any debt service obligations, loan repayments, or
deferrals remittances due in the budget must be contained within
the overall spending plan and the State must have sufficient
revenue to cover these expenses. This bill would require
reporting of these payments in a redundant section in the budget
submission.
The bill uses the term "key liability", a term that was first
used by in the "2009 LAO Letter to Assemblymember Juan Arambula"
to identify potential long terms liabilities for the state. The
bill does not define "key liabilities" and thus any list of
liabilities would be a subjective list of possible future costs
for the State. Many of the liabilities listed by LAO in 2009
were estimates of possible exposure to the State General Fund,
which designates potential risk to the State rather than certain
future obligations. This bill would create a list of "key
liabilities" and then require dedicated revenues for these
liabilities, which would suggest that these were clear State
General Fund obligations. By making such a list, this bill may
actually reduce efforts by State partners to minimize these
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future liabilities, as it would suggest that the items on the
list are both clearly a state responsibility and that the budget
includes a mechanism to pay them off.
2) Revenues. The bill contains language that restricts the
ability of the Governor to assume revenues in the January Budget
that are derived from programs that are not in effect when the
budget is submitted in January. This provision appears to
directly contradict Article IV Section 12 of California's
Constitution, which states, "If recommended expenditures exceed
estimated revenues, the Governor shall recommend the sources
from which the additional revenues should be provided."
Even if this contradiction could be resolved, restricting the
Governor's ability to assume revenues in the January Budget
submission would effectively undermine the legitimacy of the
January Budget document. In the current process, the Governor's
January Budget submission offers a framework for how to align
expenditures and revenues in the budget year. Under the
provisions of this bill, the Governor could only assume revenues
from programs and bills currently in effect. For example, if
this provision was applied to the 2012-13 budget, the Governor
could not assume the revenue from the approval of the tax
initiative, which is expected to generate over $4 billion in
revenue and is a major foundational component of his plan.
Thus, the January budget submission would no longer serve as a
serious framework document for the budget discussions.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Christian Griffith / BUDGET / (916)
319-2099